By C.Jay Engel*
Greece is on the hook for a €7 billion debt repayment in July, but may not be prepared to meet the obligation. If Europe doesn’t agree to come to an alternative agreement, the IMF may step in and bail them out again. This, according to the New York Times, which writes:
The fund has been criticized for overcommitting financial resources to the European debt crisis.
Yet the I.M.F. has an obligation to lend to countries that are in financial need as well as to safeguard global financial stability.
Ostensibly, the role of the IMF is to safeguard global financial stability and it therefore would rather continue to throw money into the black hole of Greece than let it default. What this amounts to economically is a grand case of wealthier governments propping up overly indebted poorer countries against any standard of financial prudence. And since no government acquires its wealth in the first place, the IMF acts as a mechanism of wealth transfer. As the New York Times observes:
For example, the €30 billion the fund lent to Greece in 2010 was 30 times more than the sum of Greece’s financial contribution to the fund as a member, which is called a quota. The loan is one of the largest in the history of the fund, which was formed in 1944.
Of course, this money above and beyond Greece’s own “quota” came from the taxpayers of other countries, who don’t get any benefit at all out of the IMF’s wealth transfer scam. As we near Greece’s repayment date, we are going to get nothing from the press about the Western taxpayers on the hook for the Greece bailout — and neither are we going to hear anything about the creation of debt by central banks which makes these debt crises a reality in the first place. Instead, we are going to get a surface debate about whether Europe or the IMF should compromise over Greece’s dire and never ending problem.
About the author:
*C.Jay Engel is an investment advisor at The Sullivan Group, an independent, Austrian-School oriented, wealth management firm in northern California. He is especially interested in wealth preservation in our era of rogue Central Banking. He is an avid reader of the Austro-libertarian literature and a dedicated proponent of private property and sound money. Visit his economic blog, TheAustrianView.com.
This article was published by the MISES Institute